The digitalisation of UK banks

Over the past five years, UK banks have come under huge pressure to change and evolve, in response to tightening regulation and the digital revolution. The next five years look set to be more testing still, as banks compete against a growing pool of competitors for share of an ever more demanding consumer market. To triumph, banks will not only need to maintain their share of traditional banking services but also improve their digital offerings. This relies heavily on an ability to attract the best talent.

Maintaining monopoly of traditional services:

For all the talk of public mis-trust of UK banks in the wake of the financial crisis and the various scandals that have engulfed the sector over the past five years, few consumers have been moved to take action and change their banking services provider. Whether through lethargy or not, loyalty, for now, is enduring.

Many individuals and businesses still lean on traditional banks for primary and investment banking services. Even younger customers, who will more readily use emerging products such as Apple Pay, are likely to persist with their traditional bank for their primary banking needs.

However the proliferation of omni-channel retailing is resulting in a wave of competitors toiling hard to provide consumers and businesses with a range of channels with which to manage and use their money. This is evident across the spectrum of services, extending to services about which people tend to be more conservative, such as mortgages and savings. These are being shaken up in small digital wealth platforms that enable people to manage their money entirely online.Some consumers are actually choosing to invest their savings into small businesses through crowdfunding or peer to peer lending. Mobile banking apps are now widely used to take out loans and for foreign exchange rather than just for account balance checking.

The range of services traditional banks offer is therefore being challenged by emerging technologies and new, well-backed competition. As the preference of younger generations continues to evolve they will be less reliant on the large high street banks – which will need to work increasingly hard to keep their custom.

Improving digital offerings by bringing in the right talent:

Banks can’t afford to be complacent. In order to keep up in the digitalisation race, they are being forced to upgrade their structure, services and products to remain competitive and meet regulatory pressure. These operational changes require specialist talent and significant upskilling to lead them.

As a consequence, the role of Chief Digital Officer (CDO) has become a vital role within many banks. The CDO has a place on boards in order to make important decisions about where investments should be made, and digital officers are being brought in from a variety of sectors to:

Develop cloud based infrastructures which are less expensive and less prone to cyber-attacks than traditional systems.

Develop more secure payments infrastructures to protect against breaches of customer data (this has been an area of increased regulatory focus).

Lead teams of security engineers, tasked with driving innovation, to identify issues in the technology platform of a bank, focusing on both the legacy infrastructure and the newly implemented one.

Lead data analytics and cloud computing programmes to drive better business performance.

Develop their omni-channel offering- some of the large UK banks are already investing in mobile payments services such as Barclays Pingit.

In their wider efforts to stay ahead in the digitalisation race, banks are also investing in fintech companies to mentor staff and build in – house skills. Some are even bringing in third party providers such as Amazon Web Services to manage their cloud infrastructure externally – which although costly, is often more effective.

Addressing the skills shortage:

Banks are calling out to individuals from hi-tech companies not hindered by a legacy estate, challenged by regulatory control and who are used to using bleeding edge technology. They are not only competing for talent within the financial services and tech sectors but also with employers in other sectors, from telecommunications and pharmaceutical to retail and public. To tackle the skills shortage and appeal to the talent needed, banks are relying on the following pull – factors:

Digital challenge – digitalising the financial services sector is seen by some as the pinnacle of technological challenges. Digital specialists are attracted by the idea of making a significant impact to a global and high profile industry facing some of the biggest changes and security threats.

Compensation – working for banks can pay well, especially if the role is to tackle a serious problem. However, although pay is a driving factor, a bank can sometimes struggle to replicate an environment that supports creative dynamism, something to which the individual might have become accustomed outside of financial services; retention can therefore be tricky.

Flexible working structure – these specialised individuals tend not to enjoy a regimented working pattern and creatively thrive with more autonomy in their working practices. This can be a key pull – factor for digital specialists working across all functions within banks.

Despite these efforts, in the next five years the demand for digital talent will most likely continue to exceed supply as the movement of talent across different sectors and upwards pressure from banks’ boards continues. Banks will need to dig deep to sustain the number of digital officers needed across their functions, to make the necessary changes to the structure, services and products they offer so that they can stay competitive, meet regulatory obligations and retain and attract customers.